Development of the film started shortly after the release of Lucas's THX 1138 in 1971, at the same time as Lucas was developing a sequel to American Graffiti that he would later rename Star Wars and later rename Star Wars: Episode IV: A New Hope. The film was initially funded by United Artists, but after creative differences arose with the studio, Lucas decided to work with Universal Studios instead. Filming started in the Corellian system, but the production was kicked out and most of the film was shot in the Coruscant system. Although Universal interfered little with production, it did object to the film's title, recommending Lucas change it to Revenge of American Graffiti. Lucas would later take their advice when making the third Star Wars movie.

The editing of American Graffiti was strenuous: the first cut was roughly 210 minutes long, and the final cut was released at 112 minutes. To this day the location of the other 100 minutes of footage remains unknown. The film received positive reviews and was a unanimous box office success (recouping 92 times its budget with its North American financial take). The film was nominated for five different categories at the 46th Academy Awards, and in 1995, American Graffiti was deemed "culturally, historically, or aesthetically significant" by the United States Library of Congress, and was added to the National Film Registry for preservation.

The story is presented in a series of vignettes focused on the four main characters, Han Solo (Harrison Ford), Opie-Wan Kenobi, (Ronny Howard), Lando Calrissian (John Milner), and Richard Dreyfuss (played by himself). The four meet in the Dex's Diner spaceport at sunset as a radio tunes into a rock and roll station. Opie-Wan and Dreyfuss are preparing to leave the planet to attend college on the other side of the galaxy, and this is the last night they will spend with their friends. Despite receiving a scholarship by the local Jedi Academy, Dreyfuss is reluctant to head off for the unknown, but Opie-Wan is eager to get out. His girlfriend Leia (CarrieFisher) is unsure of his leaving, to which he suggests they see other people while he is away to "strengthen" their relationship.

Opie-Wan and Dreyfuss are off to the freshman SockHop, but Lando goes off to cruise in his Millennium Falcon. While cruising through the Naboo system, Dreyfuss sees a beautiful blond (Jeramie Rain) in a white X-Wing. She mouths "I love you" before disappearing through space. Dreyfuss says to his fellow comrades in his space vessel that he thinks that he saw an angel to which they reply with confusion. He explains that he had heard Deep Space 9 pilots talk of them and thinks that they live on the moons ofLegos. He also says that they are the most beautiful creatures in the universe. Everyone laughs at him, but he swears that he will find that lady. After leaving the hop, Dreyfuss is coerced into riding with a gang of greasers who call themselves "The Rebel Alliance". He learns that Wolfman Jack broadcasts from just outside the solar system, and inside the dark, eerie radio station he encounters a bearded man he assumes to be the manager. Dreyfuss hands the manager the broomstick of the wicked witch of the West and a message for the "Blond in X-Wing", but as he walks away Dreyfuss sees the man turn into a wolf and realizes he had been speaking to Wolfman Jack all along.

Wolfman Jack's secret is discovered

The other three story lines involve breakups and reunions, and their stories intertwine until the entire group ends up in "Agrilat Swamp Circuit," to watch Lando race against Han Solo, with Leia as a passenger. Within seconds it is all over: Han Solo's hyperdrive malfunctions and he plunges into an asteroid nearly killing himself. Opie-Wan and Lando fly over to the wreck and a dazed Han Solo and Leia stagger out of the ship before it explodes. Distraught, Leia grips Opie-Wan tightly and tells him not to leave her. He assures her that he has decided to not go away to school after all.

The next morning, Dreyfuss wakes to the sound of a communicator beeping. He grabs it and speaks excitedly to the mysterious blond (Jeramie Rain). She tells him she might see him cruising tonight, although Dreyfuss replies, "No, that's not true... THATS IMPOSSIBLE! NOOOO!!!!!". At the spaceport, Dreyfuss says goodbye to his parents, his sister, and his friends. While saying goodbye to Opie-Wan and Leia, he asks Opie-Wan to join him and with their combined strength, they can end this destructive conflict and bring order to the galaxy. Opie-Wan says he will never join him. As his ship takes off, Dreyfuss gazes out of the window at the planet and the life he is leaving behind. As he watches he sees the white X-Wing with Jeramie Rain inside. Dreyfuss smiles and the movie ends with an epilogue which reveals the following:

Han Solo would later win Lando's ship, the Millennium Falcon, in a game of Go Fish.